When Does an Illegal Investment Become a Jurisdictional Problem?

A recent judgment of the Paris Court of Appeal offers a useful reminder that, in investment arbitration, not every illegality argument is a jurisdictional argument.

In its judgment of 21 July 2026 in Bolivia v Glencore Finance (Bermuda) Ltd, the Court rejected Bolivia’s challenge to a USD 253.6 million UNCITRAL award arising from the nationalisation of mining assets.

What makes the decision interesting is the Court’s reasoning: the case involved alleged violations of Bolivian law, corruption, and an alleged abusive restructuring of the investment.

Bolivia argued that the alleged illegality of Glencore’s investment deprived the tribunal of jurisdiction. The Court’s response is that this conclusion cannot simply be assumed. The first question is what the applicable treaty made a condition of the State’s consent to arbitration. And the UK–Bolivia BIT did not expressly require investments to comply with Bolivian law as a condition of consent to arbitration. The Court therefore treated the State’s standing offer to arbitrate as autonomous from the validity of the underlying investment. The tribunal could have jurisdiction to decide the dispute — including allegations concerning the legality of the investment.

An investment may be alleged to be illegal. That does not, without more, mean that the tribunal lacks jurisdiction.

The same discipline appears in the Court’s treatment of abuse of rights. Bolivia argued that the transfer of the investment to Glencore Bermuda was an abusive restructuring designed to obtain treaty protection. But hindsight is not enough. The Court focused on whether the restructuring had taken place after the dispute had arisen and whether it had conferred a significant advantage on the investor.

Then there is international public policy. Here, the Court’s review is not confined to the evidence produced before the arbitral tribunal and is not bound by the tribunal’s factual or legal findings. But that does not turn annulment proceedings into a second merits hearing. The threshold remains demanding: a generalised context of corruption, allegations or suspicion will not suffice. The alleged illegality must be supported by serious, precise and concordant evidence and connected to the subject matter of the dispute in a way capable of engaging international public policy.

The broader lesson? Jurisdiction is not a moral filter. Public policy is not a second merits appeal. And hindsight is not evidence of abuse.